Magazine article The Exceptional Parent

Self-Funded Insurance Plans

Magazine article The Exceptional Parent

Self-Funded Insurance Plans

Article excerpt

Q My three-year-old son has autism. Our health insurance coverage is with a self-funded plan that is refusing to cover his medical expenses related to his autism. The plan does not cover treatment of "mental-nervous disorders," and this is how they have classified autism.

I have filed an appeal, pointing out that autism is a developmental disorder, not a psychiatric condition. Several of my son's doctors have written letters of support also. However, the appeal has been denied. Do you have any suggestions?

L.O., New York

A A variety of health insurance programs are available in the United States. There are traditional plans, managed-care plans, government-sponsored programs (including Medicare, Medicaid and a variety of state plans), self-funded plans and other, unique programs.

Each represents a different approach to health insurance, and each is regulated somewhat differently. Traditional health insurance plans, for instance, usually involve an agreement between an insurance company and an individual consumer. That agreement deals with issues such as the specific benefits that will be offered.

Traditional plans are usually regulated by the state in which the policy was issued. Government-sponsored plans are regulated by a specific state or federal agency, with benefits established by law and government regulation.

Self-funded plans

Although many people are more familiar with traditional health insurance plans, self-funded plans play an important role in the health insurance structure. In fact, more than 60 percent of Americans who have health insurance coverage through their employers are covered under self-funded plans.

Self-funded plans are typically established through an employer or union--the "plan sponsor"--rather than through an insurance company or government agency. The plan sponsor usually pays claims directly. Although an insurance company may be involved, it acts as a "third-party administrator," not as the insurer.

Therefore, in a self-funded plan, the insurance relationship is usually between an employee and his or her employer, not between a consumer and an insurance company or between a consumer and a government agency. Most self-funded plans are regulated under a federal law called ERISA--the Employee Retirement Income Security Act--not under state law.

The importance of regulation

The question of how a health insurance plan is regulated can be extremely important. …

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